British-Dutch accounting firm, KPMG, has been reportedly fined £3 million ($4 million) by UK accounting watchdog, Financial Reporting Council (FRC), for its serious failings during the 2017 audit of Conviviality, which owned liquor store chain Bargain Booze before filing for administration in 2018.
FRC reported that it found a serious lack of competence in KPMG’s audit of the company, which collapsed nine months after having signed off the accounts.
The initial fine was set at £4.3 million ($5.8 million) but was reduced as the firm admitted to its failings.
Nicola Quayle, former KPMG partner who led the audit, was also fined £110,000 ($149,822) personally, and given a serious reprimand. However, after having admitted the failures, Quayle, who led the Manchester office and also served on KPMG's UK board, would only need to pay £80,850 ($110,120).
Conviviality, which owned liquor retailers such as Wine Rack and Bibendum, also supplied drinks to major hospitality chains such as Yates, JD Wetherspoon, and Slug & Lettuce.
With a valuation of £500 million ($680 million) in March 2018 and a staff of 4,000, the company plunged into administration during early April after investors realized that the company was left strained following its string of acquisitions.
This is the latest addition in a series of audit scandals for KPMG, the firm had also admitted to misconduct in its audit of government contractor Carillion, which collapsed in 2018.
KPMG had also received a £13 million ($18 million) fine in August last year over misconduct related to the conflict of interest in the sale of Silentnight, UK’s largest mattress and bed manufacturer, to a private equity firm.
FRC said that KPMG, one of the Big Four, should have been more skeptical of Conviviality’s claims of having somehow exceeded earnings targets at the last minute, adding that it not only failed in thoroughly checking for fraud but also in obtaining evidence for the company’s claims across five separate areas.
Jon Holt, CEO of KPMG, apologized for the audit failings, saying that he is committed to resolving and learning from the current as well as past developments in dealing with such matters.